Asia Gasoline Demand Draws European Cargoes

Robust Asian gasoline demand has drawn more cargoes from Europe over the past week. At least five LR2 vessels have been fixed within the week to load 80kt cargoes of gasoline and gasoline blendstocks from NWE (mostly Mongstad) to Singapore. Gasoline from Europe typically moves to Asia on an opportunistic basis. The sharp increase in fixtures can be attributed to the recent surge in Singapore gasoline cracks.

Singapore gasoline cracks jumped to an almost t10-month high last Wednesday on the back of firm Indonesia import demand as well as the fire and subsequent outage at ADNOC’s 800 kb/d Ruwais refinery. ADNOC’s 127 kb/d RFCC unit was shut as well, and may be down for 2-3 months. Indonesia, Asia’s largest gasoline importer, bought 11 mmb of gasoline in January which is around 30 percent higher than average monthly volumes. This was due to unplanned outages at its 260 kb/d Balikpapan refinery and scheduled maintenance at its 125 kb/d Balongan refinery. The bulk of Indonesian gasoline imports consist of the RON88 grade, with RON92 and RON95 making up the remainder. The RON88 grade is typically blended in Singapore before making its way to Indonesia. Indonesia has started shifting towards consuming more high-octane gasoline, which is likely to prompt greater demand for high RON blendstocks.

While cracks have eased slightly since last week, they are still around 25.4 percent higher than average cracks over Q4 2016. We expect refinery outages in Indonesia and South Korea to continue lending short-term support to gasoline demand in Asia.